Yum Brands goes low-key in Derby sponsorship

WilliamSpain

CHICAGO (MarketWatch) -- They won't hear "And it's Extra Crispy by a nose," but when thoroughbred-racing fans catch Saturday's Kentucky Derby they will see a corporate moniker firmly attached to one of the country's most high-profile sporting events.

Corporate sponsorship is a high-stakes business, as companies look to slap their logos on stadiums, sporting events and rock concerts.

Horse racing's marquee event will be known as the Kentucky Derby Presented by Yum Brands
YUM, +0.39%
-- the result of February pact between the Derby's owner, Churchill Downs
CHDN, -0.18%
and the parent of Taco Bell, Pizza Hut and KFC.

The deal is unusual in that it doesn't grant Yum naming rights -- unlike virtually every Nascar race and college-football bowl game -- and also in that Yum isn't using it to promote its fast food to consumers but rather its stock to individual investors.

"We have 272 million shares outstanding, and only 20% are held by individuals," which is a low ratio compared with Yum's industry peers, explained spokesman Jonathan Blum. "People know our restaurant brands but [not] our company."

Yum, which rang up more than $9.3 billion in revenue last year, is betting that its new sponsorship will attract investors, he added.

"We tried to find something that could cut through the clutter, that could be unique, and could reach the high-net-worth investor," Blum said. And the Derby hit "right on the sweet spot."

In many ways, the move seems natural. Both companies are based in Louisville and have done business together for years. Plus, few things say "Kentucky" better than the Derby and Colonel Sanders. There is also some precedent. Many of the other races on Oaks and Derby days are already named for brands, from health-care giant Humana
HUM, +0.57%
to Brown-Forman's
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Woodford Reserve and Diageo's
DEO, +0.98%
Crown Royal. Watch related video report.

Blum insisted that Yum will be careful not to go overboard with its sponsorship. The company, for one thing, didn't seek to put its name in front of the Derby's.

"You will see our corporate logo and our brand logos in many areas the camera catches, on the pony riders [who escort the racers to the gate], and in some surprising places," Blum said. "But we are being tasteful and sensitive to the great history and heritage of the Kentucky Derby."

Yum even spurned an approach from "without a doubt, one of the leading contenders" to slap Yum's logo on a jockey's silks. "We chose not to do it; it wouldn't be appropriate," Blum said.

As part of the Derby package, Yum will advertise heavily on NBC's telecast of the race, which drew about 16 million U.S. viewers last year. A spokeswoman for NBC, a subsidiary of General Electric Co.
GE, +1.97%
also confirmed that the network has agreed to refer to the Derby by its new name on screen and in commentary. Yum hopes the new name will catch on elsewhere.

"I don't think that sportswriters are going to refer to it that way," said William Chipps, senior editor of the newsletter IEG Sponsorship Report. "A lot of [reporters] have a problem with this. If a sponsor's name can be left out, there is a good chance that will happen"

And Yum's name probably won't become an integral part of the Derby's identification, partly because it's a new addition to a very well-known event. "It tends to work better with a new event," he said.

Scattered purists and a few writers have decried the Yum sponsorship as going too far -- including one Chicago newspaper columnist who said it was "trashing the dignity and tradition" of the race.

But Chipps said the risk of any real backlash is minimal. "Unlike 10 or 20 years ago, it is common nowadays for fans to acknowledge sponsors play a big role," he noted. "They have been conditioned to accept that."

The real question may be which other premier events will add sponsorships. Few sporting events have the history and prestige of the Derby, and fewer still remain unaffixed with a corporate nametag at this late date.

One obvious candidate is the Indianapolis 500, auto racing's answer to the Derby and a few hours' drive up Interstate 65 from Louisville.

"You can never say never, but under current ownership and management I don't see that happening," said Indy 500 spokesman Ron Green. "It is known worldwide and has elevated the status of the community. It means a great deal not only to the city leaders but to the Speedway's ownership. That's a fact of which we are quite proud. The Indy 500 is just not for sale."

The automobile race and the track where it is run are privately held, owned by the family that makes, among other things, Clabber Girl baking powder.

Other events in the same league with the Run for the Roses might be the Masters golf tournament or the U.S. Open of tennis -- both also free of the highest level of sponsorship.

For David Carter, director of the University of Southern California's Sports Business Institute, most top events such as the Derby will "find ways to accede to sponsorship demands without making it appear they have actually sold out."

The trick, he added, is not to "splash it everywhere."

"They don't want to suffer backlash of having the precise people they are trying to reach angry at them."

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